Australia is under increasing pressure from international pharmaceutical companies to increase the prices of their drugs.
In some cases, negotiations have failed and companies have said they will withdraw their drugs from the market. In other cases, companies have said they will not apply for their drug to be included in the Pharmaceutical Benefits Scheme (PBS) at all.
For example, the future of some PBS drugs to treat multiple sclerosis has been thrown into question following price disputes between pharmaceutical companies and the Australian government. These drugs will now remain on the PBS while the review of multiple sclerosis drugs takes place.
Earlier this year, pharmaceutical company Eli Lilly said it would not apply to list its drug tirzepatide (Munjaro) on the PBS for type 2 diabetes after price negotiations fell apart.
So what’s really going on in the background? And what does this mean for Australians’ access to subsidized medicines now and in the future?
First UK, then Australia?
US pharmaceutical companies have long sought to increase the prices of their drugs in international markets.
US President Donald Trump intervened and accused other countries of forcing pharmaceutical companies to accept lower prices.
We subsidized the healthcare of others (…) it was actually the countries that forced Big Pharma to do something that, frankly, I’m not sure they really felt comfortable doing (it).
The US-UK pharmaceuticals trade agreement, announced in December 2025, is the first major capitulation to these pressures.
In exchange for no tariffs on UK drug exports to the US, he is asking the UK’s National Institute of Health to increase the price it is willing to pay for new drugs. It also calls for the National Health Service (NHS) to double spending on new medicines by 2036.
The National Health Service is already underfunded. The extra spending on drugs will mean that cuts to other types of health care will lead to an estimated 291,000 additional deaths by 2036.
The National Institute for Health and Care Excellence now approves more than 90% of the new drugs it evaluates. So this deal will lead to higher prices, not more new drugs.
It also sets a worrying precedent for other countries, including Australia.
But negotiations aren’t just about price.
The first step in bringing a new medicine to the Australian market is approval from the Therapeutic Goods Administration. Companies must provide evidence from clinical trials of the effectiveness of their drug compared to a placebo or another drug. A new drug does not have to be better than existing treatments – just no worse.
The company then applies to list its drug on the PBS, and the Pharmaceutical Benefits Advisory Committee, an independent panel of experts, comes in to evaluate whether the drugs are cost-effective and should be recommended for inclusion on the PBS list.
It asks companies to compare their drugs to standard treatment in terms of health effects, such as quality of life or prevention of disability, hospitalization or death. Thus, price negotiations are not just about price. They are also about whether the new drug improves health.
Sometimes there are no additional health benefits. An analysis of clinical trial data from more than 1,000 new drugs approved in France found that about half were no better or worse than existing drugs.
If the Pharmaceutical Benefits Advisory Committee decides that the new drug is not better, the allowable price will not be higher than existing treatments for the same disease.
But not everyone is happy.
Felicity McNeil, chair of advocacy group Better Access Australia, told The Australian:
In the past, large companies could accept our prices (…) or even a massive price reduction agreed upon by the industry, because we were almost a charity event (…).
Australia is hardly a ‘charity cause’. We spend an average of around A$1,250 per person per year on prescription and over-the-counter drugs, ranking eighth in the world.
Australia subsidizes a lower share of prescription drugs than many other Organization for Economic Co-operation and Development (OECD) countries – 48%, compared to the OECD average of 59%.
But higher PBS prices for subsidized drugs will do little to increase this share. This is because most unsubsidized drugs purchased at the pharmacy are older, inexpensive drugs that cost less than the patient’s PBS co-pay. Even if these drugs were on the PBS, it would be cheaper to pay for them out of pocket.
Patients weigh themselves
Patient groups have joined the debate about the future of drugs they say are vital. They shared their fears if multiple sclerosis drugs were removed from the PBS due to a breakdown in price negotiations.
However, there is little evidence of additional benefits of these drugs compared with the newer and more affordable treatment ublituximab (Briumvi). This led PBS to recommend similar prices.
Many patient groups depend on industry funding. And not all media reports about patients’ perspectives include all the important details of price negotiations.
For example, in recent media reports about drugs for multiple sclerosis, patients do not mention manufacturer prices as a barrier to access. Instead, the focus is only on the potential impact of the government’s price negotiations.
What should Australia do?
Pharmaceutical companies are very profitable. Much research and development of new drugs is subsidized by the government. Government reimbursement for drugs is also key to fair and affordable access. Thus, PBS must not be intimidated by the industry.
International pharmaceutical companies that do not apply to be listed on the PBS or remove existing drugs from the market are likely to remain the exception rather than the norm, as they will lose sales of their drugs.
If this happens, Australia has other options for accessing the medicine it needs. If a company sells it elsewhere, Australia can buy it directly from another country through parallel imports.
In exceptional situations, special arrangements are also available for patients to access certain medicines that are not available in Australia.
We also need more transparency. Let’s open up pricing decisions to public scrutiny. This way, Australians can find out whether multinational companies are poor because of unusually high costs of developing and producing a particular drug, or whether those high prices simply reflect what they think the market will bear.